ALJ/GW2/ar9 Date of Issuance 3/24/2016

Decision 16-03-014 March 17, 2016

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of California-American Water

Company (U-210W) for Authority to
Modify Conservation and Rationing Application 15-07-019
Rules, Rate Design, and Other Related (Filed July 14, 2015)
Issues for the Monterey District.

DECISION ADOPTING SETTLEMENT AGREEMENT TO ELIMINATE

SUMMER OUTDOOR WATERING ALLOTMENTS
IN THE MONTEREY DISTRICT

Summary
This Phase 1 decision adopts a Settlement Agreement to eliminate the
summer outdoor watering allotment for Tiers 3 and 4 in the Monterey District of
the California-American Water Company, effective May 1, 2016. It also provides
for direct notification to customers of such elimination. The decision takes effect
immediately.
This proceeding remains open.

1. Background and Procedural History

1.1. State Water Resources Control Board Cease
and Desist Order and California-American
Water Companys Application 15-07-019
CaliforniaAmerican Water Company (Cal-Am or applicant) is subject to
State Water Resources Control Board (SWRCB) Cease and Desist Order (CDO)
WR 95-10. CDO WR 95-10 requires the cessation of the utilitys diversions of
Carmel River water by the end of 2016. Cal-Am seeks authorization in

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Application (A.) 12-04-019 to provide the necessary replacement water by

constructing a desalination plant (the Monterey Peninsula Water Supply Project -
MPWSP), with possible water purchases from the Pure Water Monterey
Groundwater Replenishment Project.
In this application, Cal-Am seeks authorization to modify its conservation
and rationing plan, rate design, and other related issues for the Monterey
District. Its proposals here, according to Cal-Am, present a set of solutions that
create a comprehensive approach to meeting the water production limitations of
the Monterey District while simultaneously ensuring the companys ability to
finance the MPWSP in a timely and economical fashion. To accomplish this,
applicant first seeks a prompt elimination of the allotment for summer landscape
watering. Specially, the Application, at 6, asks the Commission to:
[i]ssue a decision by May 1, 2016, to eliminate all outdoor watering
allotments from the rate design, consistent with the Governor's
Executive Order B-29-15, SWRCB Resolutions 2015-0032, and
Commission Resolutions [citing Commission Resolutions W-5000
(August 14, 2014), W-5034 (April 9, 2015), and W-5041 (May 7, 2015)].

1.2. Prehearing Conference and Scoping Memo

On September 8, 2015, a prehearing conference was conducted. On
November 4, 2015, the assigned Commissioners Scoping Memo and Ruling was
filed. The Scoping Memo adopts the joint recommendation of eight parties to
bifurcate the proceeding into two Phases. Phase 1 addresses the request for an
expedited rate design change to eliminate summer outdoor watering allotments
in the upper rate tiers. Phase 2 addresses all remaining issues.

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1.3. Settlement Agreement, Evidentiary Hearings

and Briefs
On December 16, 2015, several parties filed a Motion to Adopt a Phase 1
Settlement Agreement to Eliminate Summer Outdoor Watering Allotments.1 The
Settlement Agreement is in Attachment A. The dominant term of the Settlement
Agreement is:
The parties hereby agree that California American Water shall
eliminate the summer outdoor watering allotment in the upper rate
tiers 3 and 4 for the Monterey District, beginning May 1, 2016.
(Settlement Agreement at Paragraph 2.1.)
The Settlement Agreement also provides that the rate impacts of the
elimination may be raised in Phase 2 of this proceeding, and the impacts of the
elimination may be reviewed in future Cal-Am general rate cases. (Settlement
Agreement at Paragraphs 2.2 and 2.3). Finally, the Settlement Agreement
specifies that Cal-Am will notify customers in the Monterey District of the
elimination of outdoor watering allotments through direct mail, and the notice
will include an example of how the elimination could impact the customers total
bill (showing allotments, rates, usage, charges, and total bill with and without
the summer watering allotment). (Settlement Agreement at Paragraph 2. 4.)
Attachment B presents a brief summary of applicants allotment system,
including the portion at issue here. The portion here is only for residential
customers. Applicants system allots an exact amount of water to residential
customers in each rate block based on specific customer characteristics, such as

1 The motion was filed on December 16, 2015 by five parties: Cal-Am, Coalition of Peninsula
Businesses, Monterey Peninsula Water Management District (MPWMP), Office of Ratepayer
Advocates (ORA), and Public Water Now (PWN). On January 19, 2016, a Notice to Withdraw
from the Motion to Adopt a Settlement Agreement was filed by George T. Riley, as an
individual and on behalf of PWN.

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number of people residing in the household, and number of large animals. The
outdoor watering allotment is based on the size of the customers lot, and is
provided only in rate Tiers 3 and 4, and only in the months of May through
October.
Evidentiary hearing was held on January 13, 2016 to receive Phase 1
evidence, and allow cross-examination of witnesses regarding Phase 1 testimony
and the Settlement Agreement. On January 20, 2016, opening briefs were filed by
five parties.2 On January 25, 2016, reply briefs were filed by two parties.3

2. Discussion
We have considered the entirety of the Phase 1 record and the Settlement
Agreement. Taken as a whole, we find the Settlement Agreement is a just and
reasonable resolution of Phase 1 issues. In contrast, we determine that the
recommendations of opposing parties are frequently outside the scope of the
single issue in Phase 1 and, even if considered to the extent discussed below, are
not compelling.
The Commission will not approve a settlement, whether contested or
uncontested, unless the settlement is reasonable in light of the whole record,
consistent with law, and in the public interest. (Rule 12.1(d) of the Commissions
Rules of Practice and Procedure.) Settlements, however, are favored by the
Commission when they meet these tests.4 For the reasons stated below, we find
the evidence supports the adoption of the Phase 1 Settlement Agreement.

2 Opening briefs were filed by Cal-Am, ORA, and Public Trust Alliance (PTA), with a joint brief
filed by Regulatory Liaisons (RL) and PWN (PNW; jointly referred to hereinafter as Joint
Parties).
3 Reply briefs were filed by Cal-Am and ORA.
4 For example, see Decision 11-06-023.

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2.1. Reasonable in light of the whole record

Applicant faces unique and urgent problems in the Monterey District, and
expedited action is necessary to implement actions for summer 2016. The
Settlement Agreement is reasonable in light of the whole record because it takes
into account the current unique and urgent situation in the Monterey District,
and addresses the most time-sensitive issue in the proceeding in an expedited
manner for implementation by May 1, 2016. The Settlement Agreement
recognizes it is necessary to eliminate the summer outdoor water allotments
because of the current drought conditions, the urgent need to conserve water,
and to ensure compliance with the CDO. The testimony of Cal-Am, ORA and
MPWMD all support the elimination of these allotments, recognizing both that
the current outdoor watering allotments are inconsistent with the Governors
conservation goals, and that eliminating the allotments will align the price
signals in Cal-Ams rates with Californias conservation policy to discourage
discretionary use of outdoor water.
Moreover, the Settlement Agreement is reasonable in light of the whole
record by addressing ORAs concern regarding timely notice to customers about
the impact of the modifications on their bills. It does this by Cal-Ams agreement
to notify customers through direct mail, with clear information regarding effects
with and without the summer watering allotment.
The Settlement Agreement also addresses party concerns about the rate
and bill impacts of the elimination of summer outdoor water allotments in the
upper tiers. It does this by ensuring that the rate impacts relative to rate design
and total bills may be raised in Phase 2 of this proceeding as well as in
applicants future general rate cases.

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The record does not support claims raised by opponents of the Settlement.
For example, Joint Parties contend that applicant seeks to eliminate the
allotment-based rate design because over-reporting of allotments drives revenue
losses and high balances in the Water Revenue Adjustment Mechanism/
Modified Cost Balancing Account (WRAM/MCBA). To the contrary, applicant
does not make this claim, and Joint Parties fail to provide a convincing citation to
the record to show otherwise.
Joint Parties contend the desire to eliminate the allotments is driven by
excessive claiming of allotments by customers, with failure by Cal-Am to
adequately police self-reporting of eligibility for allotments by customers. Joint
Parties conclude that the Settlement Agreement should be rejected because
Cal-Am could use well-known data bases to verify allotments, thereby vacating
the need to eliminate outdoor watering allotments in Tiers 3 and 4.5 In

5 Joint parties ask that the Commission take Judicial Notice of these well-known Data Bases.
(Joint Parties Opening Brief at 4.) This request is denied. The Commission may take official
notice of matters that may be judicially noticed by California courts pursuant to Evidence Code
Section 450, et seq. (Rule 13.9 of the Commissions Rules of Practice and Procedure.) Judicial
notice shall be taken of some things (e.g., laws, rules). That is not the request here. Judicial
notice may be taken of other things (e.g., decisional, constitutional, and statutory law;
regulations; official acts; records and rules of courts), but those items are not requested here.
Moreover, judicial notice may be taken only after notice and opportunity for adverse parties to
meet the request. (Evidence Code Section 453.) Joint Parties have failed to provide adequate
notice and opportunity for adverse parties to meet the request. Judicial notice shall be taken of
facts or propositions of generalized knowledge that are so universally known that they cannot
reasonably be the subject of dispute, (Evidence Code Section 451(f)) and may be taken of (a)
facts and propositions that are of such common knowledge within the territorial jurisdiction of
the court that they cannot reasonably be the subject of dispute (Evidence Code Section 452(g))
and (b) facts and propositions that are not reasonably subject to dispute and are capable of
immediate and accurate determination by resort to sources of reasonably indisputable
accuracy (Evidence Code Section 452(h).) We do not agree that we are either required or may
take judicial notice of the items requested by Joint Parties. Nonetheless, even if we may be
required, or might agree, to take notice of the fact that Zillow, Multiple Listing Service, the
Monterey County Property Assessor, the Internal Revenue Service, and the California Franchise

Footnote continued on next page

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particular, joint parties assert that data bases can be used to verify allotments
both initially and on an ongoing basis, with these data bases kept by Zillow,
Multiple Listing Service, the Monterey County Property Assessor, the Internal
Revenue Service, and the California Franchise Tax Board. According to joint
parties, these data bases can be used in combination to verify the living capacity
of the home, the number of residents reported on tax returns, the acreage of the
property, whether the property is zoned for large animals, and to estimate the
number of large animals.
To the contrary, the record fails to persuasively show that excessive
reporting is a significant motivation for the proposed elimination. Rather, the
need is to provide reasonable price signals to motivate customers to conserve
during the drought, and in consideration of the unique water supply situation in
the Monterey District.
Further, to the extent verification might be related to our decision (which
we are not convinced it does), Joint Parties fail to demonstrate that any of these
data bases or entities they cite would be available for the purpose of such
verifications. Access is not necessarily available to confidential taxpayer
information, for example. Even if the data bases are available, joint parties fail to
present evidence of the costs to applicant of accessing such databases,
developing verification software, and implementing the verification system. Nor
do joint parties estimate the benefits of such system and compare it to the costs.

Tax Board exist and have data bases, that fact provides no useful information upon which to
decide the issue in Phase 1. Joint Parties do not cite any portion of the Evidence Code in
making their argument regarding the taking of judicial notice, and we find none that support
their request.

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In short, the record fails to support the contentions made by opponents of the
Settlement Agreement.
Joint Parties contend that the current allotment based system sums
allotments so that applicant can price water services nearly identically for all
persons. (Joint Parties Opening Brief at 2.) Joint Parties conclude that this results
in a just and reasonable system that should not be altered. To the contrary, the
record shows the outdoor watering allotments allow customers with larger lot
sizes to use increased amounts of water at reduced rates. (ORA Exhibit 101 at 2.)
This results in customers with larger lot sizes receiving a benefit not received by
other customers. The record does not support the conclusion sought by Joint
Parties that this is identical treatment.
Joint parties raise other points that are outside the scope of Phase 1, and
are not reasonably considered here regarding whether or not to adopt the
Settlement Agreement. We discuss this in more detail below. In summary,
however, as said by applicant (Reply Brief, at 2-3, footnote omitted):

The Joint Opening Brief improperly raises issues that are outside
the scope of Phase 1 that should be disregarded by the
Commission. The Joint Opening Brief raises its arguments
against the overall proposal to eliminate allotment-based rate
design repeatedly, under the guise of discussing the Phase 1
elimination of summer outdoor watering allotments. The Joint
Opening Brief opines on the verification of allotments,
mischaracterizes California American Waters rationale for
eliminating allotments, discusses the recovery of the Water
Revenue Adjustment Mechanism /Modified Cost Balancing
Account (WRAM/MCBA) under-collection, argues about lack
of allotment verification in the Monterey Districts Tariff Rule
14.1.1, and delves into the overall rate design for the Monterey
District. None of these topics are in the scope of Phase 1.
Furthermore, the Joint Opening Brief fails to make proper use of
record evidence and repeatedly relies upon information that is

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not part of the record. The Joint Opening Brief points to sections
of testimony that have not been offered by California American
Water for this phase and also attempts to rely on new
information that was not entered into the record during
evidentiary hearings. The Joint Opening Brief loosely applies its
discussions towards the Phase 1 elimination of outdoor watering
allotments, but its arguments go far beyond the scope of Phase 1
and improperly rely on information not in the record, and
should, therefore, be disregarded by the Commission.

2.2. Consistent with the Law

We find that the applied-for elimination of the summer outdoor watering
allotment as consistent with law. In particular, the Prepared Testimony,6
Rebuttal Testimony,7 and Evidentiary Testimony of Cal-Am witness Sherrene
Chew indicate that the proposed elimination meets legal mandates concerning
water conservation, rationing and drought response promulgated by the
Commission, local entities, and state government.

There are allotments for outdoor usage provided in the current

tier 3 and tier 4 rates during the summer season. Given the need
to conserve and the requirements of the current and future
conditions of the CDO, there should be no outdoor use
allotments considered in the Monterey residential rate design.
As such, we have requested that the outdoor water use allotment
be eliminated on an expedited basis to ensure compliance with
the CDO and the States expectation of reductions in water use
during the drought. (Exhibit 5 at 11-12.)

The goal in Cal-Ams opinion for the elimination of the summer

allotments is in order to continue those strong conservation
signals to customers along the Monterey Peninsula as well as

6 Exhibit 5 (Direct Testimony of Sherrene P. Chew at p.2, l.13 through p.3, l.21; at p.12, l. 1-6; p.
14, l. 2 through p.15, l.3.)
7 Exhibit 3 (Rebuttal Testimony of Sherrene P. Chew at 8.

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being consistent with mandates from both our Governor and the
State Water Board that have set forth targets for, you know, each
of the areas to reach and also to deal with the ongoing water
supply issues in Monterey. (Chew testimony, Reporters
Transcript at 47.)

2.3. In the Public Interest

The Settlement Agreement is in the public interest. It eliminates a key
impediment to further conservation in the Monterey District in time to positively
impact summer 2016 water usage. It provides for timely notice to customers
about the impact of the modifications on their bills. It addresses concerns about
the impacts of the elimination of summer outdoor water allotments in the upper
tiers by ensuring that the rate impacts relative to rate design and total bills may
be raised in Phase 2 of this proceeding as well as in applicants future general
rate cases. It achieves greater equity among applicants customers, and aligns
applicants rate design price signals with the Monterey Peninsulas conservation
needs. It provides a reasonable resolution of contested issues, saves unnecessary
litigation costs among settling parties, and conserves Commission resources. It
supports the states drought response and water conservation efforts and,
therefore, is in the public interest.

3. Competing Views of What Constitutes the Record

3.1. Regulatory Liaisons Out of Phase
Participation
RL opposed the five-party Settlement in the Prepared Testimony of its
representative, Mr. Burke. He made an unscheduled statement of RLs case at
the evidentiary hearing and that statement, regarding which the other Parties
were given, but declined, the opportunity to cross-examine. It appears from the
Joint Parties brief that RL erroneously assumes that material presented in briefs
after the evidentiary hearing but not offered at the hearing itself nonetheless is

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part of the evidentiary record on which a decision can be based. Such an

assumption is particularly unwarranted here because a November 30, 2015
protocol ruling,8 citing Article 13 of the Rules of Practice and Procedure, was
issued that made it clear that evidentiary exhibits were to be presented at the
hearing. Other guidance called for the exchange of exhibit lists before or at the
outset of the evidentiary hearing.9 While official notice was sought as to some
facts, that offer did not qualify as evidence under Rule 13.9 of the Rules of
Practice and Procedure (as discussed in this decision above).

3.2. Public Trust Alliances (PTA) Excursions

Outside The Scope Of Phase 1
PTA states that it does not take issue with the ultimate goal of eliminating
the outdoor watering allotment for customers with large lots, but does take issue
with aspects of the process at arriving at this decision in a bifurcated proceeding.
In particular, PTA asserts that a full, fair, and timely discussion of a water
supply solution, including public trust principles is avoided here by focusing
only on a limited issue in Phase 1.10
To the contrary, ORA argues correctly that the PTA briefing on alternate
water sources exceeds the scope of this proceeding set by the Application and
Scoping Memo.11

8 See November 30, 2015 Administrative Law Judges Ruling Concerning Hearing Procedures
and Protocols.
9 See November 30, 2015 Ruling at Attachment A, Item 8. A reminder was sent by e-mail from
Judge Weatherford to the service list on January 8, 2016.
10 PTA Opening Brief at 2.
11Exceedance of scope in this matter in no way speaks to the merits of transferring water from
agricultural uses to urban, a recognized method of augmenting urban water supplies in the
Western United States in recent decades.

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PTA further asserts that these proceedings have not addressed

the full dimension of the water supply issue. [Footnote omitted.]
This assertion exceeds the scope of this proceeding. The purpose
of Phase 1 is to determine whether the summer outdoor watering
allotments should be eliminated. PTAs assertions regarding
alternative water sources and water rights has no bearing on
whether the summer outdoor watering allocations should be
eliminated. Furthermore, PTAs discussion regarding alternative
water sources and water rights demonstrate the need to limit
discretionary use until Cal Am resolves its water supply issues.
Continuance of discretionary usage is against the public interest
as it sends the message that Monterey residents do not need to
conserve despite the water supply shortage in Monterey. (ORA
Reply Brief at 4.)

PTA argues that environmental justice concerns arise from the proposed
elimination of the watering allotment, particularly regarding differential impacts
on customers with large properties, and suggesting that lower-tier/lower-income
customers that live in multi-family housing might thereby be assigned a greater
portion of the cost of paying for the water supply project. (Opening Brief at 7.)
The cost and cost allocation of the water supply project the MPWSP is beyond
the scope of Phase 1.
PTA argues that federal and state laws require that the Commission
consider environmental justice matters. PTA then argues that environmental
justice concerns apply to this project and the populations affected by this
project. (PTA Opening Brief at 12-16.) The project and the affected populations
described by PTA are with regard to the MPWSP. Again, those matters are
outside the scope of Phase 1.

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Further, the discrimination and environmental justice arguments made by

PTA12 are outweighed in this Phase 1 stage by our finding that the elimination of
summer residential outdoor watering avoids unreasonable discrimination13 and
meets the state mandates for reduction in water usage.
Finally, PTAs arguments concerning procedural efficiency14 were
foreclosed by Commissioner Florios bifurcation of this matter into two phases in
the November 4, 2015 Scoping Memo (at 8). PTA failed to make a timely motion
to reconsider or amend the Scoping Memo. The reasonableness and urgency of
considering the limited issue in Phase 1 to promote consistency with state
conservation policy does not merit reconsideration of this matter now.

3.3. Cal-Am and MPWMP View of the Record

In their briefing, Cal-Am and MPWMD argue persuasively that most of
RLs offers of proof, including material presented in the Joint Parties Opening
Brief and Reply Brief, fall outside the record relevant for this Phase 1 decision.
For example (Cal-Am Reply Brief at 1-2):

the Joint Opening Brief should be disregarded because it

amounts to an improper attempt to argue issues that are outside
the scope of Phase 1 and relies on unsupported arguments and
on information that is not part of the record [T]his reply brief
demonstrates that the Joint Opening Brief is based upon meritless
and unsupported allegations, that the Joint Opening Brief
displays a fundamental misunderstanding about authorized
revenue requirements and rate design, and that contrary to the

12 PTA Opening Brief at 6-16.

13 Conclusions of Law 2, 3 and 4.
14 PTA Opening Brief at 3-6.

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Joint Opening Briefs claims, the proposal to eliminate summer

outdoor watering allotments is consistent with the law. The
Commission should reject this unreasonable attempt to obstruct
the Phase 1 Settlement Agreement, disregard the unsupported
and improper claims in the Joint Opening Brief, find the Phase 1
Settlement Agreement reasonable, consistent with law, and in the
public interest, and adopt the Settlement Agreement without
modification

4. Conclusion
In sum, the Settlement Agreement is reasonable in light of the whole
record, consistent with law, and in the public interest pursuant to Rule 12.1(d),
and we adopt it here.

5. Comments On The Proposed Decision

The proposed decision of the Administrative Law Judge (ALJ) in this
matter was mailed to the parties in accordance with Section 311 of the Public
Utilities Code, and comments were allowed under Rule 14.3 of the Commissions
Rules of Practice and Procedure. Comments were filed by PTA on March 7, 2016.
No reply comments were filed.
PTA supports (Comment at 2-4) the elimination of the summer outdoor
watering allotment and states it would have entered the Settlement Agreement
but for the provision requiring signers to declare consistency with the law. PTA
seeks the same assurance in this decision that was contained in the Settlement
Agreement to the effect that "the resolution of Phase 1 does not preclude any
party from raising the rate impacts" of the allotment elimination in Phase 2. The
request invites unnecessary redundancy in that the decision here adopts the
Settlement Agreement as is. That adoption makes it clear that PTAs concern
above is being addressed.

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Another "clarification" sought in PTA's Comment (at 3) is "language

indicating that the structure of the proceedings is not intended, and may not be
used, for piecemeal requests or to foreclose full consideration of all issues
specified in the Scoping Memo and Ruling in Phase 2." We clarify here that the
issues set out in the Assigned Commissioners Scoping Memo and Ruling of
November 4, 2015 (and not removed or modified by published rulings or
decisions thereafter) are included in Phase 2. Issues modified by published
rulings or decisions are also included as modified.
Finally, PTA repeats its concern that the elimination of the allotment, with
its discriminatory features, furthers environmental justice principles and thus is
within the scope of the proceeding, including Phase 1. (Comment at 4-6.) PTA
first addresses the language in the proposed decision that some environmental
justice concerns raised by PTA are outside the scope of Phase 1 because they
relate to the MPWSP. PTA clarifies that it understands the MPWSP is outside the
scope of the proceeding, and says the language was included for background.
While the clarification is useful, the proposed decision addresses the PTA brief as
written, and we are not convinced that this clarification merits a change in the
language in the body of the decision.
Second, PTA repeats its view that the environmental justice issue is within
the scope of Phase 1 because environmental justice in PTAs view is a ground of
support from the proposal to eliminate the outdoor watering allotment for high-
tier users... (Comment at 5.) PTA concludes that it does not believe that the
environmental justice concern is in any way opposed or inconsistent with a
finding that the elimination of summer residential outdoor watering avoids
unreasonable discrimination. To the contrary, it supplements and bolsters that

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finding. (PTA Comment at 6.) We are not persuaded by PTAs comment that
any language in the body of the decision must be modified.

6. Assignment of Proceeding
Michel Peter Florio is the assigned Commissioner and Gary Weatherford is
the assigned ALJ in this proceeding.

Findings of Fact
1. CaliforniaAmerican Water Company is subject to State Water Resources
Control Board Cease and Desist Order WR 95-10. CDO WR 95-10 requires the
cessation of the utilitys diversions of Carmel River water by the end of 2016.
2. Cal-Am seeks authorization in A.12-04-019 to provide the necessary
replacement water by constructing a desalination plant (the Monterey Peninsula
Water Supply Project), with possible water purchases from the Pure Water
Monterey Groundwater Replenishment Project.
3. In this Application, A.15-07-019, Cal-Am seeks authorization for
modifications to its conservation and rationing plan, rate design, and other
related issues.
4. Several parties entered a Phase 1 Settlement Agreement on December 16,
2015. The dominant term of the Settlement Agreement (at Paragraph 2.1) is that
applicant shall eliminate the summer outdoor watering allotment in the upper
rate Tiers 3 and 4 for the Monterey District, beginning May 1, 2016. It also
provides that the impacts of such elimination may be in reviewed in Phase 2 of
this proceeding, as well as applicants future general rate cases. Further, it
provides that applicant shall notify customers in its Monterey District of that
elimination through direct mail.
5. On September 8, 2015, a prehearing conference was conducted, followed
by Commissioner Florio's November 4, 2015 scoping memo and ruling.

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6. In Phase 1, Parties disagree what is and is not part of the record on which
this Decision can be based.
7. Applicant faces unique and urgent problems in its Monterey District, and
the Settlement Agreement takes account of these problems, addresses the most
time-sensitive issue in an expedited manner, recognizes it is necessary to
eliminate summer outdoor watering allotments because of the current drought,
ensures compliance with the CDO, is consistent with the states conservation
goal to discourage discretionary use of outdoor water, and improves the
alignment of price signals in applicants rates with Californias conservation
goals.
8. The Settlement Agreement addresses ORAs concerns regarding customer
notice, and addresses parties concerns that the rate and bill impacts of the
elimination of summer outdoor water allotments may be raised in Phase 2 of this
proceeding, and in applicants future general rate cases.
9. The public interest is to promote conservation goals, provide reasonable
notice to customers of Commission-adopted allotment changes, allow further
consideration of the impacts of the allotment elimination in Phase 2 and in future
general rate cases, improve the alignment of applicants rate design with
conservation goals, to avoid unnecessary litigation costs among settling parties,
and to support the states drought response.

Conclusions of Law
1. Governor Browns Executive Order B-29-15, the State Water Resources
Control Board 2015-0032 and CPUC Resolution W-4976 (February 28, 2014) all
call for the reduction in residential water use in light of Californias prolonged
drought.

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2. Under Rules of Practice and Procedure 12.1(d), the Commission will not
approve a settlement unless it is reasonable in light of the whole record,
consistent with the law, and in the public interest.
3. Section 451, Public Utilities Code, requires that all charges demanded or
received by any public utilityshall be just and reasonable; further, that all
rules made by a public utility affecting or pertaining to its charges or service to
the public shall be just and reasonable. The elimination of summer outdoor
residential watering allotments in the Monterey District is consistent with state
anti-drought laws and policies requiring reduction in water usage, and is just
and reasonable under Section 451.
4. Section 453, Public Utilities Code, provides: (a) No public utility shall, as
to rates, charges, service, facilities, or in any other respect, make or grant any
preference or advantage to any corporation or person or subject any corporation
or person to any prejudice or disadvantage. (b) No public utility shall prejudice,
disadvantage, or require different rates or deposit amounts from a person
because of ancestry, medical condition, marital status or change in marital status,
occupation, or any characteristic listed or defined in Section 1113of the
Government Code. A person who has exhausted all administrative remedies
with the commission may institute a suit for injunctive relief and reasonable
attorney's fees in cases of an alleged violation of this subdivision. If successful in
litigation, the prevailing party shall be awarded attorney's fees. (c) No public
utility shall establish or maintain any unreasonable difference as to rates,
charges, service, facilities, or in any other respect, either as between localities or
as between classes of service. (d) No public utility shall include with any bill for
services or commodities furnished any customer or subscriber any advertising or
literature designed or intended (1) to promote the passage or defeat of a measure

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appearing on the ballot at any election whether local, statewide, or national,

(2) to promote or defeat any candidate for nomination or election to any public
office, (3) to promote or defeat the appointment of any person to any
administrative or executive position in federal, state, or local government, or
(4) to promote or defeat any change in federal, state, or local legislation or
regulations. (e) The commission may determine any question of fact arising
under this section. The elimination of summer outdoor residential watering
allotments in the Monterey District does not make or grant any preferences, nor
does it establish any unreasonable differences in rates, and is just and reasonable
under Section 453.
5. Governor Brown issued Proclamation No. 1-17-2014 declaring a drought
state of emergency. The Governors Executive Order B-28-14 extended water
conservation activities and his Executive Order B-29-2015 imposed a mandatory
25 percent reduction in urban potable water use statewide.
6. The Settlement Agreement is reasonable in light of the whole Phase 1
record, is consistent with law, and is in the public interest.
7. Todays Phase 1 Decision should be made effective immediately.

O R D E R

IT IS ORDERED that:
1. The December 16, 2015 motion to adopt the Phase 1 Settlement Agreement
to eliminate summer outdoor watering allotments is granted.
2. The Settlement Agreement attached to this decision as Attachment A is
approved.
3. Application 15-07-019 remains open to address the issues in Phase 2.

- 19 -
A.15-07-019 ALJ/GW2/ar9

This order is effective today.

Dated March 17, 2016, at San Francisco, California.

MICHAEL PICKER
President
MICHEL PETER FLORIO
CATHERINE J.K. SANDOVAL
CARLA J. PETERMAN
LIANE M. RANDOLPH
Commissioners

- 20 -
A.15-07-019 ALJ/GW2/ar9

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(END OF ATTACHMENT A)
A.15-07-019 ALJ/GW2/ar9

B
 
A.15-07-019 ALJ/GW2/ar9

OVERVIEW OF CALIFORNIA AMERICAN WATER COMPANY RATES

WITH REGARD TO OUTDOOR WATERING ALLOTMENT FOR THE
MONTEREY DISTRICT

Phase 1 of Application 15-07-019

California-American Water Company (Cal-Am) has separate rate designs

in its Monterey District for non-residential and residential customers. Non-
residential customers do not receive an outdoor watering allocation. Cal-Ams
request to eliminate its outdoor watering allocation applies only to its residential
customers.
Cal-Ams residential customer bills are composed of three types of
charges: meter charges, surcharges, and volumetric (quantity) charges.
Residential customers pay a flat, monthly meter charge (also called a service
charge) based on the size of their meter. Surcharges are special charges
approved by the Commission for various purposes, such as conservation
program expenses.
Residential volumetric (quantity) charges are assessed per unit of
consumption. The quantity charge per unit of consumption is based on an
inclining-block (or tiered) rate design. Cal-Ams quantity rates are assessed in
five blocks. That is, there are five blocks at which water is priced, each block has
its own rate, and the rate in each block is higher than the one in the prior block.
Cal-Am is not requesting a change to current rates in this Phase of this
proceeding.
Each unit of water consumed in a block is priced at the same rate, but the
amount of water allowed in each block can vary. Once the amount of water
allowed for a block is consumed, the customer moves to the next block, at a
higher rate.
1

A.15-07-019 ALJ/GW2/ar9

Each customer is allotted a certain amount of water in each block. The

allotments are based on three customer characteristics:
x the number of people residing in the household,
x the number of large animals present on the lot, and
x the size of the lot.
Block allotments for each customer are determined by adding all three
applicable allotments.
The outdoor watering allotment is based on the size of the customers lot.
It is the only allocation that is not applied evenly to all blocks, and applies only
for a limited time each year (May through October). That is, the landscaping
allocation only increases the amount of water allowed in Blocks 3 and 4, and only
applies in May through October each year. During these six months, the
watering allocation increases the amount of water the customer may use in Block
3 before moving into Block 4, and the amount of water the customer may use in
Block 4 before moving into Block 5.
The rates, block allocations, and an typical customer example are
summarized below:
TABLE 1: TIERED RATES (as stated in A.15-07-019)
BLOCK RATE PER TENS OF CUBIC FEET RATE PER 100 GALLONS
(74.8 GALLONS)
1 $0.4528 $0.6054
2 $0.6793 $0.9081
3 $1.6768 $2.4217
4 $3.6229 $4.8434
5 $4.5286 $6.0543

2

A.15-07-019 ALJ/GW2/ar9

TABLE 2: HOUSEHOLD SIZE BLOCK ALLOCATION

HOUSEHOLD ALLOTED TENS OF CUBIC APPROXIMATE
SIZE FEET PER MONTH IN ALL EQUIVALENT
(persons) BLOCKS GALLONS PER DAY
1 15 37.5
2 30 75
3 45 112.5
4 60 150
5 75 187.5
6 90 225
7 105 262.5

TABLE 3: LARGE ANIMAL BLOCK ALLOCATION

NUMBER OF ALLOTED TENS OF CUBIC APPROXIMATE
LARGE FEET PER MONTH IN ALL EQUIVALENT
ANIMALS BLOCKS GALLONS PER DAY
1-2 5 12.5
3-5 10 25
6-10 15 37.5
11-20 20 50
Over 20 25 62.5

TABLE 4: OUTDOOR WATERING BLOCK ALLOCATION

LOT SIZE ALLOTED TENS OF CUBIC APPROXIMATE
FEET PER MONTH, ONLY EQUIVALENT
IN BLOCKS 3 AND 4, ONLY GALLONS PER
MAY OCTOBER DAY
No outside space 0 0
Up to acre 10 25
Over acre, up to acre 20 50
Over acre, up to 1 acre 20 50
Over 1 acre, up to 2 acres 30 75
Over 2 acres, up to 3 acres 30 75
Over 3 acres, up to 4 acres 30 75
Greater than 4 acres 30 75

3

A.15-07-019 ALJ/GW2/ar9

TABLE 5: TYPICAL CUSTOMER EXAMPLE

BLOCK WINTER ALLOTMENT SUMMER ALLOTMENT (May
(November April) IN October) IN TENS OF CUBIC
TENS OF CUBIC FEET FEET
1 45 45
2 45 45
3 45 65
4 45 65
5 All consumption over 180 All consumption over 220

The typical customer here is a three-person household, with no large

animals, on a to 1 acre lot. Cal-Am states this is most representative of its
single family customer base.

(END OF ATTACHMENT B)

4